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Author Topic: 529 Plan  (Read 5803 times)

olatheguyks

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529 Plan
« on: August 23, 2013, 02:28:24 PM »
I have continued to contribute money into each of my kid's 529 plan---even though my divorce degree didn't obligate me to.  When we went back to court 2 years ago--CS was reduced for $50 for each kid as that is the amount I've been putting in their accounts.

My ex and now emanicipated child is demanding I write a check to him for the full amount.  I've talked to a tax person---and a 529 account needs to be accounted for and documented of what each dollar is spent on.  Knowing a violation could come back to haunt me as the owner of the account, I don't feel comfortable sending any money to my ex or my son without him and I sitting down and laying out a plan for the money.

The way I look at it--only the last 2 years of funds put into the account (that CS was reduced for) that equals about $1,200 I may be obligated to payout.  The other amount is under my control.

Ex and son are threatening to take me to court if I don't write a check for the whole amount.  What are my options??
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KTM

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Re: 529 Plan
« Reply #1 on: August 23, 2013, 05:12:37 PM »
olatheguyks,

Saving for your children's higher education is a smart move no matter what.

Make sure that the child's ability to access this money is limited to whether or not they have a relationship with you and the maximum age allowed.

I do not know all of the legal ins and outs of these type of plans. But, I would say make it so that they can not access the account until they are age 25. Let them get other funding for their educational process and give them have the money after they graduate from a higher institution for loan repayment, a car, a house down payment, etc.

Determine the tax consequences of cashing out this money and never giving it to them if they choose not to have  a relationship with you. But, balance that with restrain from using it as a tool to control them. If you can keep the amount of funds a secret until you are comfortable with the relationship you have established with each child. I am assuming they are not aware that you have saved money for them since you have stated in a neither chain of postings that there is a No Contact Order in place between you and your children. Do not pay on demand. Any financial adviser will tell you that is the wrong thing to do. If there are instructions in your Court Orders as to how and when this account must be paid out than you must follow them as you must also follow the Federal laws regarding how the funds are accounted for. If not, opt to hold on to the funds as I have suggested and per your tax adviser says.

If there is no Court Order as to how the funds are to be paid out there is nothing they can take you to Court about since your child over the age of 18 is no longer under the Courts discretion. They could file a small claims court case. But, if your tax adviser sets things up to be paid out at the oldest maximum age and you set up any required legal documentation for that there will be no ability for them to establish a case.

Additionally, I believe that the funds can be designated for use by another child and are not required to be used/ paid out to the child you set money aside for.

Again, I have no expertise in this area. So, do your research and let us know.
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